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Russia Food and Drink Report Q1 2011
Business Monitor International, Jan 2011, Pages: 98
The Russia Food and Drink Report provides industry professionals and strategists, corporate analysts, food and drink associations, government departments and regulatory bodies with independent forecasts and competitive intelligence on Russia's food and drink industry.
The recovery in consumer spending in Russia has shown signs of cooling off in recent months, with disposable income and retail sales growth both slowing. Households have grown a tad more cautious, after some fairly encouraging momentum was built up in the first six months of 2010, helped by the fact that going into the downturn, Russians were for the most part less carrying less debt than many of their counterparts elsewhere in emerging Europe.
Russians are still fairly concerned about the state of the economy, even if things have improved over the past few months. After dropping by 7.77% year-on-year (y-o-y) in 2009, we expect real private consumption to grow by only 1.5% in 2010. Many of the discretionary trends established over the past two years remain intact, such as a preference for discount stores over supermarkets and private label over branded goods. These are not going to disappear anytime soon. However, from about 2012 the importance of private consumption to the overall economy will grow as domestic economic drivers become more important.
Headline Industry Data
- 2010 per capita food consumption +8.03%=; forecast to 2015 =+61.64%
- 2010 beer volume sales = -5.04%; forecast to 2015 = +20.78%
- 2010 mass grocery retail sales = +15.58%; forecast to 2015 = +160.30%
Key Company Trends Beer Market Less Bad Than Previously Expected After Excise Hike As Summer Heat Wave Provides Boost
– Following the doom and gloom consensus outlook on Russian beer earlier in 2010, things have picked up following an incredibly warm summer period, which was a key factor in our revised up outlook (as was improving confidence). According to Carlsberg, the Russian beer market grew by 2% in Q3, which brought the 9M10 decline down to 5%.
Vodka Clampdown Continues
– Russia is clamping down hard on vodka as the government enforces measures aimed at reining in overall consumption. About 20 litres of pure alcohol per capita are drunk annually – a figure almost without parallel – with vodka by far the most popular drink. Shops and kiosks are facing more stringent restrictions on when they can sell vodka, and in January 2010 Russia introduced a RUB89 (US$2.93) price floor on the price of half litre bottles. The ongoing clampdown on alcohol is arguably the toughest in Russia in the post-Soviet era.
Branded vodka typically sells well above the price floor introduced earlier in the year. Tighter restrictions on vodka sales could speed up the transition from the grey to formal market, at least to some extent, although this will depend on how successful the renewed measures are.
Wal-Mart One-Off Entry May Be Back On
– Wal-Mart's on-off entry into Russia may be back on. It is reportedly in negotiations to acquire Russia's sixth largest retailer by market share Kopeyka. BMI has long argued that were Wal-Mart to enter Russia, which we still believe to be extremely likely, it would only do so through a major acquisition. It is highly unlikely to go down Carrefour's ill-fated organic first, acquisition later approach, with the French retailer cutting its losses in Russia just months after entering in 2009.
Risks To Outlook Given that the Russian recovery has been primarily export-led thus far, a weakening in global energy demand in particular could undo some of the economic progress made in 2010. As domestic demand becomes an increasingly important contributor to the Russia economy over the next few years as it evolves structurally, Russia will be in a position better to withstand external events.'
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